How to save more if due to inflation your money is considered less

When it comes to payment, inflation means things are more expensive and your money is becoming less valuable. When the period of high inflation comes – as now – you can think about changing the way you handle your finances to help protect the value of your money.

“Inflation is a time for investors and investors to reconsider their strategies,” said Walter Russell, CEO of Russell and Company’s financial adviser.

Through the Federal Reserve, the government is trying to fight inflation on a large scale by raising the rate of federal funds, which is the interest rate that commercial banks use to lend and lend to each other.

As the cost of borrowing becomes more expensive, higher interest rates flow down on consumer goods such as loans and mortgages, making them more expensive. But higher interest rates can also apply to deposit accounts, which means that banks are starting to offer higher interest rates on checks, savings and certificates of deposit.

No one knows what the future will bring, but by changing the way you spend and where you save money, you will be able to more easily overcome the time of inflation.

Here are some ways to save more during inflation.

Look for high interest rates

Unable to get loans for large purchases during a period of high inflation can be frustrating. However, consumers can take advantage of higher interest rates on bank accounts to combat the impact of inflation on their cash. Interest rates on bank accounts are not usually completely higher than inflation, but these accounts can help insure against inflation much better than keeping cash at home or in a low rate account.

The average annual return on savings accounts across the country is 0.06%, according to the Federal Deposit Insurance Corporation, but there are many financial institutions that offer much higher rates – some even 1.00% APY and above. To find these rates, you can examine accounts with high yields or high interest rates and choose the bank that is best for you.

Find ways to keep costs low

If you haven’t reviewed your budget in a long time, now may be a good time. During a pandemic, you may have subscribed to several streaming services that you no longer use, or you may be spending more money on lunch or paying for extra services.

Some people are taking even more drastic steps to save money. Amanda Claypool, a financial blogger based in upstate New York, recently made major lifestyle changes to keep her spending low in the face of inflation. She spent 2021 living without a car, driving around the country, and soon plans to return to this lifestyle to save on housing. She also tried to cut her budget by cycling 16 miles back and forth to work and ate more rice and beans, cheap but healthy food.

“I am concerned about rising food prices and the impact they will have on the entire supply chain,” Claypool said in a direct message. “I use the time to prepare for future food security by learning what food my body actually needs compared to what I like to eat. It may seem drastic, but it helps me save money and eat better in the short term. ”

Not everyone can or wants to get in their car, but Claypool’s money-saving tactics can work on a smaller scale. You can ride your bike more often instead of going everywhere, and you can overestimate your food budget to add cheaper healthy food. For bigger changes you can reduce the housing to save even more money.

Consider investing or buying bonds for long-term savings

It’s a good idea to have short-term cash – such as an emergency fund – available in a savings account, but if you have savings you won’t need for a year or more, you may want to consider investing those funds or buying Treasury bonds.

“For someone who has a lot of money on the side, (investing) can help you not lose money,” Russell says. “More people may be willing to take more risks because they want higher rates of return.”

Russell also encourages consumers to look for TreasuryDirect Series I savings bonds, which can give an interest rate of more than 7% up to $ 10,000 a year. These bonds are essentially like a certificate of deposit: you invest your money one year a year, and by the end of the year you have a guaranteed rate of return that will hopefully remain above current inflation – so your money will win. t lose value.

The government will continue to review inflation data and make appropriate changes to federal fund rates. However, there are other factors that could slow inflation next year, such as changes in global supply chains that could free up stocks and lead to lower commodity prices. Whether inflation is going up or going down, it’s a good idea to look for ways to optimize your savings.

Chanel Bessett is a personal finance writer at NerdWallet who covers banking. She previously worked for Fortune, Forbes and Reno Gazette-Journal. She is also a spokesperson for the banking team, and her experience has appeared in The New York Times, Vox and Apartment Therapy.

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